What Is a SIPP Operator and What Are Their Obligations?
A Self-Invested Personal Pension (SIPP) operator is an FCA-authorised firm that provides the pension 'wrapper' — the legal structure through which you hold your investments. The operator is responsible for administering the SIPP, maintaining compliance with HMRC rules, and ensuring that the product is used appropriately.
For many years, SIPP operators argued that they were purely administrative entities — responsible only for the mechanics of the pension product, not for the investments held within it. This argument has been substantially rejected by the courts and the FOS.
The Evolving Legal Framework
The legal position on SIPP operator liability has developed through a series of landmark cases:
- Charlton v Liberty SIPP (FOS) — FOS found Liberty SIPP liable for failing to conduct due diligence on a fraudulent biofuel investment (Sustainable Agro Energy). This is widely regarded as the case that opened the door to SIPP operator complaints.
- Berkeley Burke SIPP Administration Ltd v Financial Ombudsman Service [2018] EWHC 2368 (Admin) — High Court upheld the FOS finding against Berkeley Burke and confirmed FOS's jurisdiction over operator due diligence failures.
- Adams v Carey Pensions UK LLP [2020] — Explored FSMA s.27, under which contracts established through unauthorised introducers may be voidable, enabling full restitution claims against SIPP operators.
- Options UK Personal Pensions LLP v Fletcher [2024] EWCA Civ 541 — Court of Appeal confirmed that SIPP operators owe active due diligence obligations and may be held liable where they fail in those obligations.
What Does 'Due Diligence' Mean for SIPP Operators?
Under the regulatory framework — including the FCA's Finalised Guidance FG13/8 (2013) and the Consumer Duty (2023) — SIPP operators are required to:
- Assess whether investments proposed for inclusion in SIPPs are appropriate for retail investors
- Conduct due diligence on introducers and third parties who source business for the SIPP
- Identify and refuse non-standard, illiquid, or unregulated investments that are not suitable for SIPP investment
- Satisfy themselves that the introduction chain is legitimate and that no unauthorised regulated activities are being carried out
The FCA's November 2024 Dear CEO letter to SIPP operators specifically highlighted ongoing concerns about non-standard asset holdings and compliance with Consumer Duty.
FSMA s.27 — Contracts Through Unauthorised Introducers
Section 27 of the Financial Services and Markets Act 2000 provides that certain agreements are unenforceable if they are entered into or arranged by an unauthorised person. In the SIPP context, this means that if you were introduced to a SIPP by an unregulated pension introducer, the contract between you and the SIPP operator may be voidable.
Where s.27 applies, you may be entitled to full restitution of all monies invested — not just compensation up to the FSCS cap. This makes s.27 arguments particularly valuable where losses are large.